A new recipe for climate success

Across the world, goals are being set to reduce greenhouse gas (GHG) emissions and mitigate global warming. Figuring out the best way to meet these targets involves a lot of trial and error, and no jurisdiction yet has developed a magic formula. In Canada, so far, addressing our own ambitious targets hasn’t come easily.

In 2015, the International Energy Agency was critical of Canada’s climate approaches, and a recent report offered a dire forecast. Meanwhile, a 2018 report from the independent Climate Action Tracker rates Canada’s progress as “highly insufficient.” “Canada must significantly enhance both its NDC [nationally determined contribution] and its proposed level of climate action to get onto an emissions pathway compatible with the Paris Agreement,” it reads in part.

With high-profile setbacks like repeals of the cap-and-trade system and electric vehicle (EV) incentives in Ontario, and the federal carbon pricing system facing opposition from some provinces, it’s time to mitigate the damage and make up for lost time.

A recipe for climate success may lie in just three sectors – electricity generation, residential and commercial buildings, and transportation. Collectively, these areas emit almost 50 per cent of Canada’s greenhouse gases, according to the Government of Canada. In comparison, the country’s oil and gas industry makes up about 25 per cent.

By making a few smart but modest changes in these three sectors, applying best practices from other jurisdictions, Canada could eliminate up to 91 million tonnes of CO2e annually by 2025, roughly halfway to meeting the country’s 2030 climate goal pledged in the Paris Agreement.

Here’s a look at some best practices within these areas that could be blended into Canada’s action plan.

COAL PHASE-OUT BY 2025 AND RENEWABLES AUCTIONS

Capital Power chief executive Brian Vaasjo leads the only domestic company to win a contract in Alberta’s first round of renewables auctions. Based on varied incentives at the company’s power generators across Canada and the U.S., he knows the success of utilities sometimes comes at a cost.

“An outstanding jurisdiction for us might not necessarily be the best one for consumers,” says Vaasjo. But Alberta’s renewable energy plan is a good one for both parties, he says, because while the consumer takes on less risk than the renewable builder, both still benefit.

The widely-lauded first-round auction in December 2017 offered four contracts to increase the province’s renewable generation capacity, and it came in under budget. In 2016, a renewables procurement in Ontario came in at $85 per MWh but Alberta’s auction netted an average of $37 per MWh, competitive with what it costs to run an existing coal-fired plant and a fraction of what it costs to build a new fossil fuel powered plant. The auction was successful enough that new rounds quickly followed.

While 80.6 per cent of Canada’s electricity in 2016 was generated from non-emitting sources, the remaining one-fifth, sourced from coal, oil, diesel and natural gas, accounted for all emissions in this sector. Across Canada, coal power is expected to be non-existent by 2030 but it still has a significant presence in provinces like Alberta, New Brunswick, Nova Scotia and Saskatchewan.

Moving the coal phaseout up to 2025 would open up a gap that renewables auctions could fill without hitting people’s pocketbooks too hard. Guaranteeing a certain revenue level through auctions, as Alberta is doing, allows developers to finance projects. At stake? Reducing emissions from electricity generation by up to 48 million tonnes of CO2e annually by 2025.

NET-ZERO BUILDING CODE AND PACE FINANCING

Graeme Huguet, owner of Vancouver-area My House Design Build, is used to building homes to greener standards. As Canada makes the pivot from passive buildings to net zero ones, his company has constructed at least 12 homes that are considered “net zero ready,” meaning the build is ultra-efficient with up to 80 per cent better energy efficiency than most standard homes.

By adding a renewable energy source like solar panels, the home could become Net Zero, with 100 per cent better efficiency than most standard homes – producing all the energy the home needs.

British Columbia’s Energy Step Code, an incremental plan to make buildings net-zero energy ready by 2032, and Vancouver’s building code, which features adaptability requirements and higher environmental standards, make Greater Vancouver one of the most exacting jurisdictions in the country for building and renovating homes.

According to Bob de Wit, CEO of the Greater Vancouver Home Builders’ Association, at minimum it could result in spending an additional $5,000 to $7,500 per unit for early steps. But over time, applying the strictest standards could mean spending up to an additional $55,000 per unit. According to Natural Resources Canada, 25 per cent of floor space in 2030 will be built between now and then, meaning homebuilders are going to feel the pinch.

“They’re getting something for that value,” Huguet says, referring to energy efficiency savings or resale value, but “the more stipulations, steps and regulations, the more expensive the project becomes.”

That’s where so-called PACE financing has emerged as a solution. PACE financing is a financial instrument where a loan is made for green improvements and then paid back over a long-term period with a slight increase in property taxes. Building owners benefit because they can start realizing energy savings right away, with low interest rates paid back on the loan. Private lenders make a return as well.

It’s not yet universally adopted, but PACE programs in states like California and Connecticut have shown what a well-run system can accomplish.

“It leads to projects happening that would not in the past just because the financing terms are so attractive,” says Mackey Dykes, vice president of commercial and industrial programs at the Connecticut Green Bank. Dykes points out that since the launch of PACE financing in 2015, the bank has financed over 200 commercial building projects, which represents over $130 million in financing. The impact? About US$220 million in energy savings over the life of the projects, not to mention the associated greenhouse gas reductions. That’s in a state of just under 3.6 million people.

In California, a state similar in population to Canada, as of this summer, residential PACE projects alone were projected to reduce CO2e emissions by 4.7 million tonnes.

With PACE financing initiatives under consideration in Alberta, British Columbia and Halifax, Nova Scotia, these jurisdictions are positioned to benefit from a late-mover advantage, much as Connecticut did. The state now boasts one of America’s leading PACE programs.

“We were able to learn from the mistakes, what worked and didn’t work, from other jurisdictions and I think really for the first time to make all the pieces click,” says Dykes.

In Canada, greater efficiency in new and existing commercial and residential buildings could reduce building emissions by 18 million tonnes of CO2e by 2025.

ZERO-EMISSION VEHICLE MANDATES

Hugo Jeanson, co-owner of Bourgeois Chevrolet in Rawdon, Quebec, is one of the leading EV dealers in the province. While an $8,000 government rebate for electric vehicles helps convert customers to zero- and low-emission vehicles, it’s only part of the equation of why his customers make the switch, he says. Ultimately, the desire to save money on fuel and maintenance costs looms large. “They want to pay for the car and that’s it.”

Starting with the 2018 model year, Quebec implemented a cap-and-trade quota system where zero-emission vehicles must now make up a minimum 3.5 per cent of all vehicles a manufacturer sells in the province. China, where half the world’s EVs are sold, is launching a quota equivalent to 10 per cent of annual sales in January 2019. Daniel Sperling of the Institute of Transportation Studies at the University of California, Davis, says quotas are as important for the symbolic value as for the actual impact on both car companies and consumers.

He adds major car companies have made investments in developing EV technology. “It’s just really a question of how fast they roll them out and at what scale,” he says. Quotas “[tell] the auto industry ‘it’s time to start selling.’” General Motors is even taking a hands-on role, publicly supporting a national quota in the United States.

But value-added perks for EV drivers, small as they may seem, also play a large role in encouraging adoption. “In Quebec we have advantages like a few bridges that are free when you have a green plate,” says Jeanson. “You can go on a commuter lane even if you’re alone.”

Aggressive zero-emission vehicle quotas for passenger and freight vehicles in Canada could mean eliminating 25 million tonnes of CO2e from the atmosphere by 2025.

None of these measures exist in a vacuum. New transmission capacity will be required to integrate additional renewables onto the grid, for instance, and an entire army of contractors and developers will need to be trained in order to green Canada’s building sector. But these policies offer some of the best prospects for accelerating deployment of cost-effective technologies to make Canada a cleaner, more competitive economy while taking the country a long way toward the climate goals it committed to under the Paris Agreement.

Rob Csernyik is a freelance journalist and editor of Great Canadian Longform.